Today we had a number of data releases from the US, which came on the soft side. However, the US GDP for Q1 was revised higher by Atlanta FED, which came as a bit of a surprise. The USD wobbled up and down for a while but has now stabilized and is little changed on the day.

We’re at that time of the month when it’s common for month-end flows to have a significant impact on the foreign exchange (FX) market. Today, the US dollar initially rose around 30 pips during late European session, despite the soft retail sales from the US, but quickly reversed course and has ended up back down where it was. The timing of this move suggests that it was primarily driven by flow-related factors rather than fundamental drivers.

In fact, the CB consumer confidence figures were reported to have fallen short of forecasts, which theoretically could have provided a reason to sell the US dollar before the fix. However, today and in the next two days, the activity in the FX market will be under the influence of month-end flows on currency movements, emphasizing the importance of considering not only fundamental factors but also technical and flow-related dynamics when taking up forex positions. USD/JPY has rebounded around 50 pips higher from 150 lows.

Atlanta FED GDP Now for Q1

A while ago, the Atlanta FED GDPNow estimate for Q1 of 2024 was revised upward to +3.2%, compared to the previous estimate of +2.9%. This revision may seem puzzling given the decline in both the headline and core durable goods orders for January, but the Atlanta FED also provided insights into the factors driving the revision.

According to them, recent reports from the US Census Bureau and the National Association of Realtors have led to an increase in the forecast for first-quarter real gross private domestic investment growth, from 2.5% to 4.6%. This suggests that investment activity, particularly in the private sector, is expected to be stronger than previously anticipated. It’s important to note that the GDPNow estimate is based on a model that incorporates a wide range of economic data, and revisions are common as new data becomes available.

While the recent weakness in durable goods orders may have initially raised concerns, other factors such as investment growth can offset these trends and contribute to an overall more positive outlook for GDP growth. As the Atlanta Fed mentioned, it’s still early in the quarter, and additional data releases will continue to shape the GDP forecast. Therefore, it’s essential to monitor economic indicators closely for a comprehensive understanding of the economic landscape and its potential impact on GDP growth in the coming quarters.